Wednesday, February 29, 2012

Oil Exports From Iraq Continue To Stagnate, While Revenues Continue To Benefit From International Tensions

Since the second half of 2011, Iraq’s oil exports have stagnated, but revenues have remained high. That’s because of a combination of bottlenecks in the country’s infrastructure, bad weather, and occasional attacks by insurgents. At the same time, tensions in the Middle East continue to keep prices high for petroleum, meaning that Iraq has not lost out in profits despite the problems with its oil industry. That’s about to change this year as the country has finally completed the first part of its expansion program in the southern port of Basra, and has other big plans to boost exports.

In January 2012, Iraq’s oil exports declined, but profits increased, a trend that was seen throughout 2011. In January, the country exported an average of 2.107 million barrels a day. That was down from 2.145 million barrels the previous month. Both of those marks were below the average for 2011, which stood at 2.16 million. Basra continued to be the workhorse for the country, exporting 53.1 million barrels for the month, compared to just 12.2 million through the northern pipeline to Turkey. In total, Iraq exported 65.3 million barrels, down from 66.5 million in December. Iraq was still able to bring in large profits however. A barrel of Iraqi crude sold for $109.081 in January, compared to $106.18 in December. That meant while foreign sales declined, profits went up from $7.061 billion in December to $7.123 billion the next month. That was the highest price since April 2011, and the largest revenues since August. Prices can be expected to stay up for the foreseeable future with the continued tensions in the Middle East. The latest example is the new sanctions against Iran, and Tehran’s threats of retaliation. On February 19, for instance, Iran announced it was cutting exports to England and France, because of new European trade restrictions. Iran has also threatened to shut down the Straight of Hormuz. While these moves have mostly been symbolic, it still spooked international traders and markets, leading to oil prices staying high. This will obviously benefit Iraq, which depends upon petroleum for 95% of its revenue. At the same time, exports have hit a wall. In the first half of 2011, exports climbed to an annual high of 2.27 million barrels a day in June. After that they steadily declined to the current rate. That’s why in the first half of last year, Iraq averaged 2.19 million barrels a day, but then 2.13 in the second part.

Basra recently opened a new mooring point to increase the flow of oil exports in Feb. 2012 (Reuters)

Iraq still has huge potential for growth, but it’s unlikely to reach anything that the government talks about. For one, Iraq has never achieved its production goals. In 2011, it wanted to reach 2.74 million barrels a day, but only produced 2.54 million barrels. It also needs to build new storage facilities and pipelines to end the constant bottlenecks it faces. In November 2011 for instance, it produced six times as much oil as it could export. Iraq also has a bad record of finishing anything on time. The fourth bidding round has been delayed four times, and the new mooring point opened a month late. The Oil Ministry has also refused to install all of the necessary meters on the industry to keep accurate numbers on production and exports. That’s likely due to a lack of money and corruption within the agency. All together, that places a large number of barriers before the country to reach any of its lofty numbers. Still, with the completion of each infrastructure project Iraq’s capacity will go up, and so will its revenues with the continued high prices for oil.

IRAQ HISTORY TIMELINE

TWITTER

About Me

Musings On Iraq was started in 2008 to explain the political, economic, security and cultural situation in Iraq via original articles and interviews. I have written for the Jamestown Foundation, Tom Ricks’ Best Defense at Foreign Policy and the Daily Beast, and was responsible for a chapter in the book Volatile Landscape: Iraq And Its Insurgent Movements. My work has been published in Iraq via NRT, AK News, Al-Mada, Sotaliraq, All Iraq News, and Ur News all in Iraq. I was interviewed on BBC Radio 5, Radio Sputnik, CCTV and TRT World News TV, and have appeared in CNN, the Christian Science Monitor, The National, Columbia Journalism Review, Mother Jones, PBS’ Frontline, the Center for Strategic and International Studies, the Institute for the Study of War, Radio Free Iraq, Rudaw, and others. I have also been cited in Iraq From war To A New Authoritarianism by Toby Dodge, Imagining the Nation Nationalism, Sectarianism and Socio-Political Conflict in Iraq by Harith al-Qarawee, ISIS Inside the Army of Terror by Michael Weiss and Hassan Hassahn, The Rise of the Islamic State by Patrick Cocburn, and others. If you wish to contact me personally my email is: motown67@aol.com